TORONTO (Reuters) - Toronto's main stock index rallied sharply yesterday, reclaiming most of last week's losses, as higher oil prices boosted energy issues and as the TSX caught up with a rise by US stocks on Monday when the Toronto market was closed.

The energy sector jumped 5.5 percent to lead the market rally as oil prices hit a six-month high. Canadian Natural Resources was up 7.1 percent at C$62.06, while Suncor Energy climbed 4.2 percent to C$35.08.

After rallying nearly 3.9 percent earlier in the day, the Toronto Stock Exchange's S&P/TSX composite index retreated slightly to finish up 338.10 points, or 3.46 percent, at 10,100.95, with all 10 of the index's main groups firmly in the black. The TSX was closed on Monday for the Victoria Day national holiday.

"It's a three percent catch-up from yesterday and basically one percent on its own," said Francis Campeau, a broker at MF Global Canada, in Montreal.

Yesterday's gains nearly recovered the resource-laden TSX's 4.6 percent loss for last week.

Market watchers said Toronto was largely playing catch-up with US stocks, which rose 2.9 percent on Monday, partly because of stronger than expected results from Lowe's Cos Inc , the No. 2 US home improvement retailer.

While US stocks were mostly weaker yesterday, analysts said the markets held up well given US data that showed a slide in housing starts and permits in April.

"The market is extremely resilient," said Campeau.

The resource-laden TSX got a boost from firmer commodity prices, with oil climbing more than one percent to settle at $59.65 a barrel as a flurry of US refinery problems fuelled supply fears.

Gold was also firmer, helping to boost the broader materials sector, which was up three percent.

In the commodities space, investors who feel "underweight" may be putting their money to work again to ensure they don't miss a market rally, said Rick Meslin, head of Canadian equities at UBS.

Generally, Meslin said the market "feels good."

"People are willing to take on risk here and I think the market is telling us now that's the prevalent view," he said.

Financials rose 3.7 percent as investors were reassured by news that several major US banks are seeking to repay government bailout funds.